Commentary: Vultures circling Madoff victims' settlements

Its meal of choice is carrion. Attracted by the smell of death and decay, it dines on road kill, dead fish, and the entrails and other waste animal parts left behind by hunters. It defends itself by regurgitating partly digested food, whose nasty odor is said to repel enemies.

When you see a group of them huddled on the highway ahead, or wheeling over a country field, you know that some creature has met an untimely end.

During the economic free fall that plunged our country into such intractable distress, when I thought of the culpable parties — the grandees of Wall Street and the mortgage lenders whose cupidity triggered the crisis — I thought of predators.

By that I mean leopards and hyenas and jackals, the great white shark and such. Yes, they can be savage. They kill to eat, though they hardly can be blamed for that. They are animals, after all. And what’s more, they have a certain dignity.

Aren’t the big mortgage bankers more or less of a kind? They kill, too — not just to eat, but also for the excitement, the pure sport of it. And abominable as one might find it, one cannot help admiring the cunning by which, after sinking the ship of state, they have managed to pluck swollen bonuses out of the wreckage.

The vulture, however, is not a predator. It nourishes itself neither by courage nor by wit, but by feasting on the leavings of some other animal’s misfortune.

And it was vultures that came to mind when I read the other day about the hedge fund managers and other clever speculators who have spied a golden opportunity in the misfortune of the individuals and organizations that lost money in the Ponzi scheme orchestrated by Bernard Madoff.

Madoff was the predator, now safely caged. The victims of his 20-some-year fraud, who lost at least $20 billion of principal and possibly as much as $65 billion of paper gains, were the prey.

A torrent of high-dollar lawsuits have been initiated, aimed at recovering those losses. But given the tangled web of Madoff’s dealings, the inevitable slowness of litigation and the sheer number of claimants, it could be years before they receive a measure of compensation.

The speculators, betting that many of the financially wounded cannot afford the wait, are offering to buy the claims at rates of some 30 to 35 cents on the dollar, hoping to double or triple their money in the final settlement.

Is it smart dealing? Yes.

Is it legal? Yes.

Does it summon up the image of vultures picking at carrion? Absolutely.

The practitioners would no doubt argue that it is just another creative way of turning a profit, like the payday loan racket or a betting parlor. But isn’t creative profiteering what got us in the fix we’re in?

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Not all investors have the stomach for profiting off the pain that Madoff caused.

“The fraud is just so despicable,” the president of one trading firm told The New York Times, “that, from a moral perspective, it just didn’t make sense for us. There are plenty of other ways to make money in this business.”

Other fund managers are making a different choice. If their bets pay off handsomely, I’m sure they will look splendid strutting around Manhattan in their $10,000 William Fioravanti marino wool suits.

But a vulture, too, looks wonderful in flight — a miracle of grace as it owns the sky.